Cost of drugs can be prescription for pain
Skyrocketing prices often lead to hard choices,
A month’s worth of Glumetza diabetes pills cost Marge Meffert $746 last April. Then the price began skyrocketing — to $6,714.
It wasn’t an isolated surge. The price of Lantus insulin rose 34% in a year. A widely used antibiotic called doxycycline jumped from $20 to $1,849 in six months. And a heart-rhythm drug called Isuprel costs six times what it used to: $1,300 a vial.
While the cost of cancer and HIV medicines tend to grab headlines, vaulting prices increasingly include medicines for more common conditions afflicting millions. The issue has raised the ire of Congress, which is tackling prescription drugs in a hearing Feb. 4 before the House Committee on Oversight and Government Reform. And it’s forcing hard choices for patients, who face high insurance deductibles and co-pays that leave them shouldering a larger share of health care costs.
“Usually what ends up happening is people end up not taking their medicine. And you’re talking about basic medicines … It’s a vicious cycle,” says Praveen Arla, a family practice physician in Bullitt County, Ky. He says he’s not surprised companies are raising prices. “If the government and the market allows you to do it, you will,” he says.
Drug company officials defend their actions, saying, among other things, they must make enough money for research and development. Holly Campbell, a spokeswoman for the trade group PhRMA, says companies reinvest an average of 20% of revenues into the creation of new treatments. But Arla and other critics say companies are hiding behind the innovation argument and are angling for bigger profits.
“Look at the stocks,” Arla says. “The stocks are doing great.”
According to an analysis for USA TODAY by S&P Capital IQ, total returns in the S&P Composite 1500 Pharmaceutical Industry Index, a subset of the S&P Composite 1500 Index, rose 6.2% in 2015; the S&P SmallCap 600 Pharmaceuticals Industry Index rose 29.4% in the same period. Among drug companies globally, profits through the third quarter of last year were up 26% compared with the year before.
Darlene Twymon of Rochester Hills, Mich., had to stop taking a rheumatoid arthritis drug that was working well because she had to pay $2,000 a year toward the $42,000-a-year medicine. “I couldn’t afford it anymore,” she says.
Meffert, of Louisville, is able to keep taking her diabetes medi- cine only because Medicare covers the vast majority of the cost. “They want to raise Medicare,” she says, “and I can understand why.
he latest drug trend report from pharmacy benefits manager Express Scripts contains ample evidence of the cost crisis. It says prices for brand-name medicines more than doubled in five years, and overall drug spending went up 13% in 2014 after years of declines. Drugs for diabetes, which afflicts 22 million Americans, topped the list for spending increases among medications to treat common conditions at 18%, Express Scripts Chief Medical Officer Steve Miller says.
Spending was driven almost exclusively by price hikes, not increased use. Use of diabetes drug Lantus, for example, rose 0.5% while the price rose 34%, Overall, use of diabetes drugs rose less than 2% while prices rose 16%. Use of drugs for mental and neurological disorders dropped 0.5% as prices rose nearly 10%.
Drug companies and industry experts offer several explanations for the price hikes.
Take the case of Glumetza. Officials for Canada-based drug maker Valeant say they expect a generic competitor to enter the market as soon as next month and point out that it’s common to raise prices in the period before that happens. They also cite their more than 200 active research and development programs and six new drug applications approved by the federal government in the last three years. Valeant has been the subject of Congressional scrutiny over pricing practices, such as raising the prices of newly-acquired drugs.
Laurie Little, Valeant’s senior vice president of investor relations, says the company tries to shield consumers from rising prices: “We offer significant patient assistance programs to help ensure out-of-pocket costs don’t prevent patients from receiving the medicines they need, and the introduction of a generic compet- itor to Glumetza will lead to a dramatic reduction in the overall cost to the market.”
Experts agree competition from generics, especially when”a patent is about to expire,Tdrives up prices for all sorts of medicines — as do research and development costs. According to the Tufts Center for the Study of Drug Development, it takes an average of $2.6 billion and 15 years to develop and win approval for a new drug. Drugmakers also may raise prices when they buy from other companies, as happened when Valeant bought Isuprel from Marathon Pharmaceuticals. Another cost driver is “shadow pricing,” when companies mirror competitors’ price increases.
The changing makeup of the industry also makes a difference. In the past, Miller says, the landscape was dominated by huge companies selling hundreds of medicines that could afford to have winners and losers. Today’s market includes a growing number of small companies dependent on a few products.
But industry observers say market forces don’t tell the whole story and contend that sometimes price hikes are simply a way to boost the bottom line.
Recent surveys by wellness company HealthMine found a third of consumers with diabetes or prediabetes and a third of people living with heart disease risk struggle to afford drug treatments. A Kaiser Health tracking poll last summer suggests patients blame drug makers, finding 72% of Americans consider costs unreasonable and 74% feel companies put profits before people.
Insurers and pharmacy benefit managers are taking steps they hope will reduce costs.
One strategy is to exclude expensive medications from drug formularies to shift people toward cheaper drugs, says Nadina Rosier, North America health and group benefits practice leader of pharmacy at the professional services firm Willis-Towers Watson. Patient assistance programs sponsored by drug companies also provide some financial help.
For now, experts expect drug prices to continue pushing up the nation’s health care costs, which already make up nearly 18% of U.S. economic activity — and keep needed medicines out of reach for many